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Friday, February 26, 2010

Budget eyes Rs 40,000 cr from stake sales in FY11

ndia expects stake sales in state firms to fetch Rs 40,000 ($8.6 billion) in 2010/11, an estimate analysts believe is achievable as most upcoming government offers would draw investor interest.

The targeted amount was announced by Finance Minister Pranab Mukherjee on Friday during his presentation of the Budget for the fiscal year that starts on April 1.

The government is currently implementing an ambitious plan to offload holdings in 60 state-run firms over the next few years aimed at raising funds for welfare programmes without stretching an already wide fiscal shortfall.

India raised about $1.8 billion from stake sales in government firms Oil India and NHPC in 2009, and has offloaded stakes in No. 1 power producer NTPC and power finance firm Rural Electrification Corp for about $2 billion this year.

The government is expected to raise about $3 billion from a sale in state-run miner NMDC in March.

"The government had set a target of Rs 25,000 crore for the current fiscal, which it has more than delivered, and so the estimate it has given for the next year is very reasonable," said Sonam Udasi, vice president at BRICS Securities.

"It could have been more aggressive and given a higher number, but divestment is a sensitive topic and he is cautious considering what happened with NTPC," Udasi said, referring to Mukherjee.

The NTPC sale was just covered on the final day after state-run Life Insurance Corp of India and State Bank of India stepped in to buy shares in the absence of robust foreign-investor interest that was blamed on a market downturn and a controversial French auction book-building system.

But the REC sale, which closed on Tuesday, was covered more than three times, helping raise about $760 million and easing concerns that interest in government stake sales was waning.

"There is no doubt when Coal India and others come to the market next year, there will be some genuine interest for them," Udasi said.

Stake sales in state-run Steel Authority of India, Hindustan Coppe, Coal India and telecoms firm BSNL are expected in 2010/11.

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